Myners argues bonuses are bleeding pension funds
Lord Myners will renew his attack on institutional investors this morning, telling them that an excessive bonus culture in the financial services industry is hitting British pensions.
The City Minister, who wrote to big shareholders last month demanding to know what they planned to do to limit bankers’ bonuses, will use a speech to the National Association of Pension Funds (NAPF) to emphasise that the real losers in the failure of institutional pension funds to control bonuses are the funds’ own clients.
The NAPF and other industry bodies have fought back against the Government’s criticisms that they helped to cause the banking crisis by being “absentee landlords” in the groups in which they hold shares.
The association will launch a new governance code this morning that will urge pension funds and other institutional investors to engage more actively with boards in order to promote better standards.
David Paterson, the NAPF’s head of corporate governance, said: “These initiatives aim to promote a stronger corporate governance culture and thus help to protect and enhance the value of the investments that funds oversee on behalf of their members.”
Lord Myners will tell the NAPF that the reason financial services businesses have cut dividends in recent months is that they are spending too much on bonuses. Over the past ten years, he will add, pension fund investments in the sector have yielded nothing for their customers.
The City Minister will say that companies should be run for the benefit of their owners, not for their highly paid employees. One of the Government’’s biggest problems is with Royal Bank of Scotland, which is in discussions with the Treasury about a bonus pot that could reach £1.3 billion.
The storm over executive pay appears to be moving on from the banks. Grainger, the property group, faces a shareholder revolt tomorrow over a multimillion-pound payoff to Rupert Dickinson, its outgoing chief executive. Both the Association of British Insurers and Pirc, the investor consultancy, are advising shareholders to vote against the £2.9 million payment, equating to six times Mr Dickinson’s salary, at the company’s annual meeting.
The company said: “The payment to Rupert was made strictly on legal advice and consisted of unpaid salary in lieu of notice and accrued but unpaid bonus for past performance, together with a payment to meet the company’s legal responsibilities.”
Wednesday’s vote could be close, as 20 per cent of Grainger’s shares are held by one institutional investor, Schroders, and the turnout at an AGM is usually only 60 per cent. Schroders declined to comment, but a source said that it would be hard for the fund to vote in favour of a remuneration report condemned by corporate governance experts.
Helen Power, The Times 09-02-2010